Trade balance worsens

RIGA - In July 2010, the current account surplus in Latvia’s balance of payments dropped to 38.7 million lats (55.2 million euros), show data from the Bank of Latvia, reports news agency LETA. The revenue account balance rose a little over the course of the month, but the total trade balance of goods and services worsened. Though close to balanced, it is still negative.
Latvia’s foreign trade deficit reached 98.6 million lats, according to data from the Central Statistical Bureau (CSB). This represents deterioration in the country’s trade deficit, which continued to grow - in June it was 83.7 million lats, while in May it was 75.5 million lats.

Export volumes in July reached 388.1 million lats, which is 41.9 percent higher when compared to July of last year. However, imports reached 486.7 million lats, which is 29.4 percent more when compared to the same month last year.
The worsening of the trade balance compared to June was the result of both the prevalence of goods imports increasing faster than exports, and worse services trade results than in the previous month. It was mostly the value of the cargo transport and financial services provided that decreased, while the value of transport services received increased. The balance of the revenue account rose a little over June as the amount of dividends paid decreased and businesses of direct foreign investors continued to suffer losses.

The current trends of economic development warrant a cautious view of the future development of the current account surplus: its decrease will continue to be determined both by the increasing imports, resulting from the need for intermediate goods in manufacturing, and the possible rise in the imports of investment goods and consumer goods promoted by a gradual recovery of domestic demand.

The rapid rise in exports may moderate, however: the resumption of foreign demand, which outpaced any rise in domestic activity, has a positive effect of exports, yet there is no basis for expecting a rapid rise in exports in the near future.